Transaction privilege taxes in Arizona—commonly referred to as “sales tax”—are deceptively complex. Politicians and reporters tend to treat them as a single tax, levied on most sale transactions that occur in a given jurisdiction. (Like the City of Tucson.) But the truth is considerably more complicated.
Arizona’s cities and towns tax a number of different business activities at a number of different rates. Some uniformity among the categories exists, thanks to the Model City Tax Code—a system of taxing rules maintained by a state commission. (I explained this in a bit more detail in my previous post about how Tucson’s sales taxes compare to other Arizona cities and towns.)
The pie chart below shows all the different business activities that comprised the approximately $219M in sales taxes collected by the City of Tucson in fiscal 2017. As you can see, about half comes from retail sales—a category that includes the sale of most over-the-counter items, excluding groceries.
But other types of activity contribute noteworthy shares, too. Restaurants and bars—the second-largest category—accounted for about $23.4M of Tucson’s sales tax revenue, or about 10 percent of the total.